Dell Shares Dive as Revenues Soften

Tuesday

Aug 21, 2012 at 12:01 AMAug 21, 2012 at 8:17 PM

The PC maker says third-quarter sales will fall because of a weak economy.

James Rogers

ROUND ROCK, Texas (TheStreet) -- Shares of Dell(:DELL), the world's No. 2 PC maker, fell after second-quarter revenue trailed analysts' estimates. The company said sales in the current quarter will slip from the second quarter.

The Round Rock, Texas-based company reported revenue of $14.5 billion, down from $15.7 billion in the same period last year, and below analysts' forecast of $14.64 billion.

Excluding items, Dell earned 50 cents a share, compared to 54 cents a share in the prior year's quarter. Analysts surveyed by Thomson Reuters were looking for earnings of 45 cents a share.

With PC sales under pressure, Dell expects its third-quarter revenue to slip between 2% and 5% sequentially. Excluding items, the HP(:HPQ) rival also adjusted its full-year earnings guidance to $1.70 a share, which includes a 2- to 3-cent dilutive impact from Dell's pending acquisition of Quest Software(:QSFT). Analysts surveyed by Thomson Reuters were looking for earnings of $1.90 a share.

The company's shares slumped 3.6% to $11.90 in extended trading after falling almost 2% during the regular session.

"Growth in our PC business was challenging, as we saw a tough macroeconomic and competitive environment, and continued to focus on higher-value solutions in this business," Dell CFO Brian Gladden said in a statement released after the market close.

Dell, however, said that attempts to boost its enterprise business are starting to pay off.

"Our performance in the second quarter provided another proof-point that our long-term strategy is right," said Gladden. "We continued our progress in shifting the mix of our business to higher-margin enterprise solutions, led by solid growth in our server, networking, services, and Dell IP storage businesses."

Revenue from Dell's Enterprise Solutions and Services business grew 6% year-over-year to reach $4.9 billion. The company's server and networking sales climbed 14% over the same period, while revenue from Dell-owned storage increased 6%.